Sysco reports sales increased. The use of local sourcing and organic ingredients increases food safety risks. The number of c-stores grew last year but at a very slow rate. Fast-food restaurant traffic was flat last year while traffic at other restaurants declined. Technology investment pays off for Panera Bread.

Sysco, the broadline foodservice distributor, reported U.S. sales of $18.6 billion for its quarter ending Dec. 31, 2016. This represents an increase of 0.1 percent.

Given Sysco’s position in the foodservice field, some view them as an indicator for overall industry performance.  So what do Sysco’s results say? For those observers who believe there is a “restaurant recession” Sysco’s sales results will confirm their position. They will say Sysco’s results show the broadliner is simply taking market share from other distributors.

Those in the field who ask “What recession?” can point out that if things were as bad as some believe, Sysco’s sales would have reflected a larger tumble.

So, if you are looking to Sysco’s results to provide a definitive answer as to whether there’s a restaurant recession, keep looking.

As for Sysco, the company remains on solid footing as its gross profit, operating income, net earnings, and earnings per share all increased in the quarter.

Economic News This Week

• Small business managers express enthusiasm about the future. A survey by the National Federation of Independent Business found that small businesses optimism “skyrocketed” from August to November with the index rising 7.4 points for a final reading of 105.8, its highest level since 2004. In August, 12 percent of those surveyed expected better business conditions, while the November survey found 50 percent did. Those expecting real sales to rise were up 20 points and small businesses saying it was a good time to expand rose 12 points.
• First-time jobless claims totaled 234,000, a decline of 12,000 for the week ending Feb. 4. The 4-week moving average fell 3,750 to a final level of 244,250. It has been more than 40 years since this average has been that low.
• Consumers slowed their borrowing in December. The Federal Reserve reported that consumer credit increased 4.5 percent for the month on an annual basis. Revolving credit (mostly credit card debt) increased at an anemic 2.9 percent rate after a huge increase of 14.4 percent in November. Non-Revolving credit — car loans, student loans, etc. — rose 5.1 percent.
• The University of Michigan’s preliminary February Index of Consumer Sentiment dropped from January’s level of 98.5 to 95.7 for February. But, a university spokesman points out the index remains “quite favorable” with only five higher readings in the past decade. The Current Economic Conditions Index was 111.2, virtually unchanged from January’s 111.3 reading. The Index of Consumer Expectations, however, slid to 85.7 from 90.3 in January. What makes the responses unique from past surveys is the wide “partisan divide” among the respondents.

Foodservice News This Week

• Restaurant Brands International Has Lost Interest In Acquiring Popeye's according to a recent report. Restaurant Brands, owner of Burger King and Tim Horton's. announced last year they would be interested in buying another chain, is reported to having talks with Popeye's Louisiana Kitchen in October and November, but the chicken chain's strong financial performance in the company's last financial quarter drove the stock up roughly 10%. Evidently Restaurant Brands found the deal too expensive at the higher stock price.

• Deloitte predicts more food safety problems on the horizon. In a 2017 forecast about the travel, hospitality and leisure market, the research and consulting firm contends moving toward more organic and locally sourced foods may lead to more food safety issues.
• There are 154,535 c-stores in the U.S. as of Dec. 31, 2017, according to research by NACS and Nielson. This represents an increase of 340 stores or just 0.2 percent from 2015. The number of c-stores has grown 63 percent in the last 3 decades and they now account for 34 percent of all retail outlets in the country.
• Traffic at fast-food restaurants was flat in 2016 and traffic at full-service restaurants declined, per the NPD Group. With fast feeders representing 80 percent of restaurant visits in the U.S., total foodservice traffic declined. NPD stated that a 2.0 percent decline of lunch traffic last year was a “major contributor” the industry traffic slump. Still, there were close to 62 billion visits to foodservice operations last year and dollar spending at fast-food restaurants rose 3.0 percent, and by 2.0 percent for the total industry.
• Panera Bread Company’s investment in technology pays off. Panera Bread’s CEO reported that ordering kiosks and other technology upgrades are helping to offset rising labor costs due to increases in the minimum wage and a tighter labor market. And, with the use of smartphone apps, 25 percent of the company’s sales are now online. Panera Bread also reported that same-store sales increased 0.7 percent system wide, with company-owned locations up 3 percent and franchised locations down 1.4 percent.
• McDonald’s restaurants in Florida have a new design that includes a boxier roof, touchscreen kiosks, and table service. So far McDonald’s and its franchisees in Central Florida have redone 87 locations and will do another 17 this year.
• McDonald’s opened a “French-inspired” restaurant in New York City. The design is entirely different from the classic McDonald’s and has been described as “metallic, open and simple.” The operation has a concierge, both touchscreen and counter ordering and has French pastries on the menu.
• Starbucks offers free legal advice to employees regarding the president’s travel ban. The chain is working with a division of Ernst & Young to assist employees and their families affected by the recently announced travel restrictions.
• Corporate Stirrings: Buffalo Wild Wings has responded to investment firm Marcato Capital Management’s proposal for four seats on the BWW board by voicing confidence in the chain’s existing board but stating they will review the nominations in line with the company’s governance guidelines. Buffalo Wild Wings also announced plans to sell about 10 percent of its 631 company-owned units to franchisees as a “test” to see if the restaurants can be run more profitably. The chain also plans to open 15 company-owned units and 15 franchised units in the U.S. and 20 franchised restaurants overseas this year. Finally, Buffalo Wild Wings announced same-store sales for company-owned locations declined 4.0 percent and 3.9 percent at franchised units. Noodles & Company plans to close 55 restaurants, or roughly 10 percent, of the chain’s 510 units. The company expects it will cost $29 million or more to terminate leases, pay real estate fees, and for severance pay. At the same time, the company also expects to open a dozen or more new locations this year. Pizza Hut, struggling with declining same-store sales, suspects its major problem is that consumers think of the chain as a sit-down restaurant and they have a weak image of its delivery capabilities. The chain has brought in experts to work on digital ordering, delivery times and physical stores. Pizza Hut management also feels that the lack of uniformity of franchisees’ POS systems is a hindrance.
• Growth Chains: Arby’s plans to open 25 stores in New York and Pennsylvania in the next 6 years. Sub Zero Ice Cream will open 75 stores in Texas in the next 10 years. Cameron Mitchell Restaurants has more than a dozen of their concepts in various stages of development.
• Comparable Store Sales Reports: Bad Daddy Hamburgers up 2.0 percent, Baskin Robbins down 0.9 percent, Dunkin’ Donuts up 1.4 percent, Good Times Burgers down 0.5 percent, Rave Restaurant Group (Pie Five Pizza down 17.4 percent and Pizza Inn down 1.2 percent), and YUM! Brands (KFC up 4 percent, Pizza Hut down 4.0 percent, and Taco Bell up 3.0 percent)

For details and same-store sales reports for other chains, refer to the Green Sheet.